Euro hits all-time high vs. yen, 2-yr high vs. dollar in Tokyo

The euro hit an all-time high against the yen and a two-year high against the U.S. dollar Thursday morning in Tokyo as investors betted on an interest rate hike in Europe by summer.

The U.S. currency firmed against the yen, briefly rising above the mid-119 yen line, in a windfall of the strong euro.

The euro strengthened against the yen and the dollar for most of Tokyo morning trading, rising to around 160.80 yen at one point, its highest level since its introduction in 1999, dealers said. It also rose to around $1.3460.

At noon, the euro traded at $1.3465-3470 and 160.78-83 yen compared with Wednesday's 5 p.m. quotes of $1.3426-3436 and 160.29-39 yen in New York and $1.3422-3425 and 160.01-05 yen in Tokyo.

The dollar was quoted at 119.40-45 yen against Wednesday's 5 p.m. quotes of 119.35-45 yen in New York and 119.19-22 yen in Tokyo.

The dealers said the single European currency was favored as investor speculation about a near-term interest rate hike by the European Central Bank, most likely in June, increased.

"Market participants have been speculating about an imminent interest rate hike by the European Central Bank," said Akihiro Tanaka, senior currency trader at Resona Bank.

"The possibility of widening in the interest rate gap between Japan and Europe fueled investors to move on and try the euro's upside," Tanaka said.

He said the euro's rise was backed by receding speculation that Group of Seven financial chiefs will mention the yen's weakness in their statement to be issued after their one-day meeting Friday in Washington.

"At this point, market participants feel safer with the euro than the dollar," Tanaka said.

The U.S. currency traded mostly in the lower 119 yen level, staying solid as investors lacked reasons to buy the yen.

Dealers said weaker-than-expected Japanese machinery orders for February, released Wednesday, led market participants to believe an interest rate hike on the part of the Bank of Japan was unlikely to happen anytime soon.